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Title: | Seven pitfalls of technical analysis |
Authors: | Caporale, GM Plastun, A |
Keywords: | technical analysis;data snooping;financial markets;price forecasting;trading |
Issue Date: | 17-May-2023 |
Publisher: | Elsevier |
Citation: | Caporale, G.M. and Plastun, A. (2023) 'Seven pitfalls of technical analysis', in Apergis, N. (ed.) Encyclopedia of Monetary Policy, Financial Markets and Banking, New York,: Elsevier, pp. [1] - [7]. doi: 10.1016/b978-0-44-313776-1.00001-5. |
Series/Report no.: | Elsevier Reference Collection in Social Sciences |
Abstract: | This contribution examines the main drawbacks of technical analysis. Although this is widely used by practitioners, from an academic perspective it can only be seen as a form of “voodoo finance”. In particular, it runs into the following pitfalls: Subjectivity; Doubtful assumptions; Unjustified algorithms; Low profitability; Data snooping; Statistically insignificant results; Unrealistic simplifications. The key conclusion is that it is high time that (self-fulfilling) technical analysis be replaced by more sophisticated time-series forecasting methods and models such as fractional integration, R/S analysis and autoregressive specifications. |
URI: | https://bura.brunel.ac.uk/handle/2438/26121 |
DOI: | https://doi.org/10.1016/b978-0-44-313776-1.00001-5 |
ISBN: | 978-0-44-313776-1 |
Other Identifiers: | ORCID iD: Guglielmo Maria Caporale https://orcid.org/0000-0002- 0144-4135 |
Appears in Collections: | Dept of Economics and Finance Embargoed Research Papers |
Files in This Item:
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FullText.pdf | Embargoed indefinitely | 263.36 kB | Adobe PDF | View/Open |
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